Vantage Drilling Company v. Hsin-Chi Su , 741 F.3d 535 ( 2014 )

Case: 13-20379 Document: 00512491343 Page: 1 Date Filed: 01/07/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-20379 January 7, 2014
Lyle W. Cayce
VANTAGE DRILLING COMPANY, Clerk
Plaintiff–Appellant,
v.
HSIN-CHI SU, also known as Nobu Su,
Defendant–Appellee.
Appeal from the United States District Court
for the Southern District of Texas
Before HIGGINBOTHAM, OWEN, and HIGGINSON, Circuit Judges.
PER CURIAM:
Plaintiff–Appellant Vantage Drilling Company (Vantage) is
incorporated in the Cayman Islands, with its principal place of business in
Texas. Defendant–Appellee Hsin-Chi Su is a Taiwanese citizen. Vantage sued
Su in Texas state court on various state law claims arising from Su’s role as a
director of Vantage from 2008 to 2011. After Su removed the case to federal
district court on the basis of diversity jurisdiction, Vantage moved for remand,
which the district court denied. Vantage appeals the district court’s denial of
remand. Because Vantage is a corporation with foreign citizenship and Su is
a foreign citizen, we reverse and remand with instructions that the district
court remand this case to the state court from which it was removed.
Case: 13-20379 Document: 00512491343 Page: 2 Date Filed: 01/07/2014
No. 13-20379
I
Vantage is an offshore drilling contractor that provides drilling units,
related equipment, and work crews to major oil and natural gas companies
around the world. Vantage is incorporated in the Cayman Islands, with its
principal place of business in Texas. Su served on Vantage’s board of directors
from June 2008 to April 2011. Su is a Taiwanese citizen. In August 2012,
Vantage filed suit against Su in Texas state court for: breach of fiduciary duty;
fraud, fraudulent inducement, and negligent misrepresentation; and unjust
enrichment. Vantage sought damages, the imposition of a constructive trust
on all profits or benefits obtained by Su, and a full accounting for all such
profits and benefits.
Su timely removed the case to federal district court on the basis of
diversity jurisdiction, alleging that diversity of citizenship existed by virtue of
Vantage’s Texas citizenship and Su’s Taiwanese citizenship, and that the
amount in controversy requirement of 28 U.S.C. § 1332(a) was satisfied
because the profits and benefits obtained by Su and sought by Vantage
included approximately 100 million shares of Vantage stock and tens of
millions of dollars in loans and cash. Vantage moved for remand, arguing that
Vantage’s Cayman Island’s incorporation and Su’s Taiwanese citizenship
destroyed diversity jurisdiction because of the presence of aliens on both sides
of the litigation.
The district court denied Vantage’s motion to remand. It agreed that
Vantage had dual citizenship, one of which was foreign, and that Su was a
foreign citizen. However, it concluded that complete diversity was lacking only
between Su and “one aspect of the single plaintiff with dual citizenship,” and
not Su and Vantage as parties. Noting that Vantage has no employees or
operations in the Cayman Islands and that its headquarters and primary
operations are in Texas where it “hires local workers, buys local supplies, rents
2
Case: 13-20379 Document: 00512491343 Page: 3 Date Filed: 01/07/2014
No. 13-20379
local buildings, donates to local charities, and serves local customers,” the
district court concluded that Vantage was “fully Texan” and that Su, as a “fully
foreign party,” might face parochialism in a state court. Analogizing to human
citizens for whom “[r]emoval is proper if the dual national’s dominant
nationality is American irrespective of its other affiliations,” the district court
held that Vantage could not “rely[] on its foreign charter to avoid a national
court despite the predominant reality of its existence.”
Vantage filed a petition for permission to appeal the district court’s
order denying remand, which was denied due to the district court’s failure to
properly certify the order for appeal under 28 U.S.C. § 1292(b). Following an
amended order from the district court certifying the denial of remand for
interlocutory appeal, Vantage filed a second petition for permission to appeal
the district court’s order, which we granted. This interlocutory appeal
followed.
II
“We review de novo a denial of remand to state court.” 1 Remand is
required “if at any time before final judgment it appears that the district court
lacks subject matter jurisdiction over a case removed from state court.” 2
Subject matter jurisdiction over a state claim in federal court under 28 U.S.C.
§ 1332(a) exists when the amount in controversy is satisfied and there is
complete diversity of citizenship between the parties. 3 The burden is on the
removing party to show that removal is proper. 4 Any “doubts regarding
1 Rodriguez v. Sabatino, 120 F.3d 589, 591 (5th Cir. 1997) (per curiam).
Int’l Primate Prot. League v. Adm’rs of Tulane Educ. Fund, 500 U.S. 72, 87 (1991)
2
(quoting 28 U.S.C. § 1447(c)) (internal quotation marks and alterations omitted).
3 28 U.S.C. § 1332(a); Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir.
2013).
4 Mumfrey, 719 F.3d at 397.
3
Case: 13-20379 Document: 00512491343 Page: 4 Date Filed: 01/07/2014
No. 13-20379
whether removal jurisdiction is proper should be resolved against federal
jurisdiction.” 5
III
The facts of this case are substantially similar to those we addressed in
Chick Kam Choo v. Exxon Corp. 6 In Chick Kam Choo, a Liberian corporation
with its principal place of business in New Jersey was sued in Texas state court
by citizens of Singapore. 7 The case was removed to federal court on the basis
of diversity jurisdiction and the district court denied the plaintiffs’ motion for
remand. 8 We reversed, holding that “diversity jurisdiction under 28 U.S.C.
§ 1332(a)(2) may not be invoked in a suit between an alien and an alien
corporation with its principal place [of] business in a state of the United
States.” 9
Our holding rested on two main principles. First, § 1332(c)(1), which
deems a corporation a citizen of “every State and foreign state” in which it is
incorporated and the “State or foreign state” where it has its principal place of
business, applies to alien corporations. 10 Second, § 1332(a)(2) requires
complete diversity. 11 Because the defendant was incorporated in Liberia, it
5 Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).
6 764 F.2d 1148 (5th Cir. 1985).
7 Chick Kam Choo, 764 F.2d at 1149-50.
8 Id. at 1150.
9 Id. at 1153; see also id. at 1152 (“The question here is whether a suit may be
maintained in federal court between an individual alien and an alien corporation having its
principal place of business in a state of the United States. We answer this question in the
negative.”).
10 Id. at 1151-52; see 28 U.S.C. § 1332(c)(1) (“For the purposes of this section and
section 1441 of this title . . . a corporation shall be deemed to be a citizen of every State and
foreign state by which it has been incorporated and of the State or foreign state where it has
its principal place of business . . . .”).
11Chick Kam Choo, 764 F.2d at 1151; see 28 U.S.C. § 1332(a)(2) (“The district courts
shall have original jurisdiction of all civil actions where the matter in controversy exceeds
4
Case: 13-20379 Document: 00512491343 Page: 5 Date Filed: 01/07/2014
No. 13-20379
was a citizen of a foreign state under § 1332(c)(1). 12 Because the plaintiffs were
citizens of Singapore, there were aliens on both sides of the litigation, complete
diversity was lacking, and diversity jurisdiction did not exist. 13
Applying these principles to the present case dictates an identical
outcome because it is undisputed that Vantage is a citizen of a foreign state
under § 1332(c)(1) and that Su is also an alien. Thus, as in Chick Kam Choo,
there are aliens on both sides of the litigation, complete diversity is lacking,
and there can be no diversity jurisdiction.
Su asserts, however, that Chick Kam Choo based its decision on an
additional rationale: given the underlying purpose of diversity jurisdiction to
afford a neutral forum to out-of-state parties who might be subject to local bias,
there was no need to permit diversity jurisdiction in Chick Kam Choo because
the risk of such bias was remote. 14 Su contends that this justification does not
apply in the present case because the risk of prejudice to Su is more than
remote. To this end, he argues that, unlike the foreign plaintiffs in Chick Kam
Choo who were unlikely to benefit from local bias, Vantage is likely to reap the
rewards of a local forum because it is a dual citizen plaintiff with its principal
place of business and primary operations in Texas. Accordingly, unlike the
defendant in Chick Kam Choo which did not need the protection of a federal
forum because of the remote risk of local bias favoring the foreign plaintiffs,
Su contends that he needs a federal forum to avoid the “significant danger that
the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of a
State and citizens or subjects of a foreign state . . . .”).
12 Chick Kam Choo, 764 F.2d at 1152.
13 Id.
14 See id. at 1153 (“[T]he danger is remote that the alien plaintiff will benefit from
local bias of state courts or juries. Thus, the underlying purpose of diversity jurisdiction
simply would not be furthered by its extension under the facts of this case.”).
5
Case: 13-20379 Document: 00512491343 Page: 6 Date Filed: 01/07/2014
No. 13-20379
. . . as the alien defendant [he] will be unfairly prejudiced by the local bias of
the state courts or state juries.”
However, the fact that Su may be subject to local bias while the
defendant in Chick Kam Choo was not is relevant only if the minimal risk of
prejudice against the defendant in Chick Kam Choo was a necessary basis for
our decision. 15 We conclude that it was not.
First, the comments in Chick Kam Choo regarding the remote risk of bias
to the defendant came after we had already held that “[b]ecause [the
defendant] is a citizen of Liberia, and because the plaintiffs are citizens of
Singapore, diversity jurisdiction may not therefore be invoked under
§ 1332(a)(2).” 16 Second, the phrasing of the discussion—“[o]ur decision is also
grounded in the clearly established congressional policy underlying diversity
jurisdiction”—indicates that the remote risk of bias provided supplemental,
rather than necessary support for our decision. 17 Indeed, we have previously
considered other circumstances in which a non-resident defendant may face
local bias and have not concluded that a federal forum is justified or that
diversity jurisdiction exists by virtue of the risk of prejudice to the defendant. 18
15 See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 67 (1996) (“When an opinion
issues for the Court, it is not only the result but also those portions of the opinion necessary
to that result by which we are bound.”); Rios v. City of Del Rio, Tex., 444 F.3d 417, 425 n.8
(5th Cir. 2006) (“[A] prior panel’s explication of the rules of law governing its holdings may
not generally be disregarded as dictum.”); cf. In re Hearn, 376 F.3d 447, 453 (5th Cir. 2004)
(concluding that analysis in an earlier decision was not binding because it was “unnecessary
to the decision in the case and therefore not precedential”) (internal quotation marks
omitted).
16 See Chick Kam Choo, 764 F.2d at 1152.
17 See id. at 1152 (emphasis added).
18See, e.g., Gray v. Beverly Enters.-Miss., Inc., 390 F.3d 400, 402, 412 (5th Cir. 2004)
(ordering remand to Mississippi state court of suit brought by Mississippi plaintiffs despite
citizenship of defendants from California, Arkansas, and other states, due to lack of diversity
between plaintiffs and defendants from Mississippi); see also 15 JAMES WM. MOORE ET AL.,
MOORE’S FEDERAL PRACTICE § 102.12[1] (3d ed. 2013) (explaining that under the rule of
6
Case: 13-20379 Document: 00512491343 Page: 7 Date Filed: 01/07/2014
No. 13-20379
The discussion in Chick Kam Choo concerning the remote risk of bias to the
defendant was an alternative ground for our decision and not a “portion[] of
the opinion necessary to that result.” 19
Our view finds additional support in the fact that other circuits facing
similar alignments of parties and citizenships have also concluded that
complete diversity is lacking and that diversity jurisdiction does not exist. 20
Even though allowing this case to proceed in federal court might further the
underlying purpose of the diversity statute, “[u]ntil Congress changes our
jurisdiction and allows us to hear cases based on something less than complete
diversity, we cannot act.” 21
* * *
For the foregoing reasons, we REVERSE and REMAND with
instructions that the district court remand this case to the state court from
which it was removed.
complete diversity, diversity jurisdiction may be held not to exist despite the risk of prejudice
to an out-of-state defendant sued in state court).
19 See Seminole Tribe, 517 U.S. at 67.
20 E.g., Peninsula Asset Mgmt. (Cayman) Ltd. v. Hankook Tire Co., 509 F.3d 271, 272-
73 (6th Cir. 2007) (holding that one plaintiff’s incorporation abroad destroyed diversity
jurisdiction in suit against fully foreign South Korean defendants even though plaintiff may
have had its principal place of business in the United States); Universal Licensing Corp. v.
Paola del Lungo S.p.A., 293 F.3d 579, 581-82 (2d Cir. 2002) (holding that plaintiff’s
incorporation abroad destroyed diversity jurisdiction in suit against fully foreign Italian
defendants even though plaintiff may have had its principal place of business in New Jersey);
Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 990-93 (9th Cir.
1994) (holding that assignment of contract rights from subsidiary to parent was collusive
attempt to maintain diversity jurisdiction because diversity jurisdiction in suit against fully
foreign defendant would have been destroyed by subsidiary’s incorporation in Bermuda even
though its principal place of business was Oregon).
21 Smallwood v. Ill. Cent. R.R., 385 F.3d 568, 576 (5th Cir. 2004) (en banc).
7